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Net neutrality and inflation of traffic

Author

Listed:
  • Peitz, M.
  • Schütt, Florian

    (Tilburg University, School of Economics and Management)

Abstract

Under strict net neutrality Internet service providers (ISPs) are required to carry data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate the short-run effects of different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient allocation of traffic and traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, the ISP implements the efficient allocation when allowed to introduce bandwidth tiering and charge for prioritized delivery.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Peitz, M. & Schütt, Florian, 2016. "Net neutrality and inflation of traffic," Other publications TiSEM 212dc390-3f55-4231-9a6f-5, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:212dc390-3f55-4231-9a6f-5cae2d6a8c00
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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